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If you recently got your first job, congratulations and welcome to the working world! We've been there and certainly understand that it can be tempting to just run out and spend your paycheck on the latest tech toys or clothes, but we'd like to see you take at least some of your hard-earned money and make smart decisions. Here are three things we wish we had done as soon as we got our first jobs, so you can use your first paycheck as wisely as possible.
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Brian Stoffel: It's generally a good rule of thumb to assume that there's no such thing as a free lunch in life. There are, however, a few exceptions to this rule, and if you're about to start your first job, there's a "free lunch" you must absolutely take advantage of. That comes in the form of an employer match to your 401(k) or 403(b).
These accounts are set up to take money directly out of your paycheck now (tax-free), invested into a plan that you choose, and left there until retirement comes knocking -- at which time you'll pay taxes. Generally speaking, you can usually find better investment options if you put your money into a Traditional or Roth IRA that you have 100% control over.
But you should always do whatever's necessary to get the maximum company match. For instance, at my old job, my employer would put 3% of my salary into a 401(k) if I participated in the plan, as well as matching the first 3% that I put in. In essence, I was shaving 3% off my paycheck but getting 9% total put in.
That's as close as you'll ever get to free money. And with time on your side -- you've got decades until retirement -- those small contributions now will make an enormous difference over the years.
Brian Feroldi: When you land your first job and you see that first paycheck hit your bank account, it's natural to feel like you're rich. After all, odds are good that your living expenses have been extremelylow for the past few decades, so seeing your bank balance balloon from your first two weeks on the job can make you feel like going on a shopping spree.
However, you'll quickly learn just how expensive and unpredictable your finances can be. Taxes, housing, food, and transportation can quickly whittle away your newfound fortune to nothing. Plus, sooner or later, you're bound to be hit with some kind of unexpected bill that will throw your finances for a loop.
Knowing that life is unpredictable, one smart move to make when you're just starting out is to build up an emergency fund of a few thousand dollars and keep the money safe in an easily accessible account. While it's a great idea to have such a fund at any age, it can be especially important to have one when you're just starting out, as the odds are high that your early career will involve a lot of moving when new career opportunities present themselves. Having some money set aside to pay for a deposit on a new place or to handle an emergency car repair is a really smart move to make. After all, you don't want to have to go running back to your parents or to have to lean on a credit card every time something unexpected happens.
Put a few thousand dollars away for a rainy day. I guarantee that your future self will thank you.
Matt Frankel: If you've just landed your first job, you may not yet have access to a 401(k), but that doesn't mean you shouldn't start saving for the future.
In my opinion, the smartest financial move you can make is to open a Roth IRA and contribute a portion of every paycheck. Basically, a Roth IRA lets you put away money to invest and save for retirement, and you'll never have to worry about paying taxes on the money you save later on. Simply contribute regularly, choose some solid stocks or funds (here are a few to get you started), and watch your nest egg grow.
Unlike a 401(k) or traditional IRA, money you choose to save in a Roth IRA isn't tax-deductible, but since you're likely to be in a low tax bracket while you're early in your career, you shouldn't need to worry too much about that.
Now, I completely realize that saving money in a Roth IRA probably doesn't seem like an exciting way to use some of your paycheck -- especially if you're in your teens or early 20s -- but believe me, now is the best time to get started. Based on the stock market's historic performance, every $1,000 you set aside at age 20 could be worth about $60,000 when you turn 65 and are ready to retire. That's just over $80 per month. Imagine how much you could have if you save a few thousand dollars every year.
The article 3 Genius Money Moves to Make When You Land Your First Job originally appeared on Fool.com.
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